Proposed CGT will have little effect on price growth of residential properties

by Duffie Osental18 Mar 2019

The proposed capital gains tax (CGT) is expected to have little effect on residential property price growth, which a recent survey indicated will remain broadly positive.

Colliers International’s quarterly residential property market outlook survey found a net positive 15% of respondents expect median house prices to increase over the next 12 months. This means that more respondents expect median residential property prices to rise than those who expect a decline.

Read more: Number of houses sold in February falls by 9.5% – REINZ

However, this is lower than expectations from previous quarters – down from a net positive 23% in December 2018 and a net positive 26% in September 2018.

When asked how much sale prices would be impacted by the introduction of a CGT, 42% of respondents indicated less than 5%, while 37% stated more than 5%. Also, just over 22% indicated a capital gains tax would have no impact on sale prices.

All regions recorded a lower overall result than the previous survey, said Chris Dibble, research and consulting director at Colliers. “Queenstown held onto its top spot for the tenth consecutive quarter, with a net positive 39% of respondents expecting house price growth,” said Dibble.

“Tauranga/Mt Maunganui remained in second place, with a net positive 30%, while Wellington has held onto third place, with a net positive 26%.”

Dibble said median price expectations in Auckland overall were negative for the first time, with a net negative 10%.

“This reflects the current market conditions, with REINZ data showing median prices have decreased by 0.5% over the past year.”

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